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May 05

Today’s RBA Rate Prediction

The current September 2009 government bond is yielding 2.77% indicating the market is expecting (most likely) only one more 25bps rate reduction over the next few months. Most economists expect the RBA to stay steady today and given the RBA reduced rates last month by 25bps I also expect it to stay steady as they have indicated in the past their desire to see how their actions are received before reducing again.

The budget is only one week away and it may be packed with enough goodies to provide the economy with a boost but no matter what, the global problems will still overwhelm the Australian government’s action so there’s a long way to go. With inflationary expectations still very low, I see no reason why the RBA shouldn’t cut rates, but I still expect a 3% cash rate tomorrow.

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